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Samia makes $8,000 a month. Samia spends $2,500 on rent and related household expenses, $500 on food, $200 on clothes, $500 on entertainment and $600 on transportation. She always keeps $200 for things like the car breaking down. $3,500 is invested in the stock market. Which of the following statements is TRUE?

ANSWER:

The transactions demand for money is $4,300, the precautionary demand is $200 and the asset demand is $0.

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